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AI: Leasing Out 777s Is Loss-making  
User currently offlinena From Germany, joined Dec 1999, 10631 posts, RR: 9
Posted (3 years 7 months 3 weeks 1 day 11 hours ago) and read 12322 times:

AI, which unsuccessfully had been planning to lease out half a dozen of its 777s since a year or so, has now shelved this plan, as the three offers received would have meant the low lease rates offered would not have been sufficient enough to cover the capital costs of those expensive aircraft. Seems 777s arent that much in hot hot demand anymore.

http://www.flightglobal.com/articles...es-plans-for-leasing-out-777s.html

41 replies: All unread, showing first 25:
 
User currently offlineAA737-823 From United States of America, joined Mar 2000, 5722 posts, RR: 11
Reply 1, posted (3 years 7 months 3 weeks 1 day 10 hours ago) and read 12108 times:

Quoting na (Thread starter):
Seems 777s arent that much in hot hot demand anymore.

Not really an appropriate conclusion to the evidence at hand.
A more appropriate conclusion would be that the 777's WHICH AI IS OFFERING FOR LEASE are not hot commodities.
But to say that all 777s aren't in hot demand, when there's quite the healthy new frame backlog, is a hasty generalization.


User currently offlineNAV20 From Australia, joined Nov 2003, 9909 posts, RR: 36
Reply 2, posted (3 years 7 months 3 weeks 1 day 10 hours ago) and read 12014 times:

Quoting na (Thread starter):
the low lease rates offered would not have been sufficient enough to cover the capital costs of those expensive aircraft

Interesting 'angle' on modern business practice. The 'other' way of putting this decision is that AI has opted to go on paying the FULL cost of financing the aircraft because the prospective lessors are only prepared to cover MOST of it..........

I expect that they're able to access government money. Hope so, anyway - if they can't, given that they can get the market fundamentals THAT wrong, they won't be in business for much longer.........



"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
User currently offlinePlaneHunter From Germany, joined Mar 2006, 6714 posts, RR: 78
Reply 3, posted (3 years 7 months 3 weeks 1 day 9 hours ago) and read 11996 times:

Quoting AA737-823 (Thread starter):
Not really an appropriate conclusion to the evidence at hand.

  

Quoting AA737-823 (Reply 1):
A more appropriate conclusion would be that the 777's WHICH AI IS OFFERING FOR LEASE are not hot commodities.

Exactly. It's not surprising at all that a niche aircraft like the 77L is hard to lease out. And one has to consider that these aircraft have a full AI interior and other AI specifics.

We also don't know any financial details either.


Quoting AA737-823 (Reply 1):
But to say that all 777s aren't in hot demand, when there's quite the healthy new frame backlog, is a hasty generalization.

I can only agree.


PH

[Edited 2010-12-04 05:49:30]


Nothing's worse than flying the same reg twice!
User currently offlineMaersk737 From Denmark, joined Feb 2004, 678 posts, RR: 1
Reply 4, posted (3 years 7 months 3 weeks 1 day 9 hours ago) and read 11823 times:

Maybe it's just an excuse to keep them in the fleet? Since AI may have to wait a little longer for the 787...

Peter



I'm not proud to be a Viking, just thankfull
User currently offlinena From Germany, joined Dec 1999, 10631 posts, RR: 9
Reply 5, posted (3 years 7 months 3 weeks 1 day 7 hours ago) and read 11475 times:

Quoting AA737-823 (Reply 1):
Not really an appropriate conclusion to the evidence at hand.
A more appropriate conclusion would be that the 777's WHICH AI IS OFFERING FOR LEASE are not hot commodities.

Thats hairsplitting. What would make AIs 777s so different to all other 777s that you dispute my conclusion? Could you please elaborate? AIs 777s are brandnew, and no one seems to want them at reasonable lease rates, that the bare truth. As per the article only dumping prices were offered.


User currently offlinelightsaber From United States of America, joined Jan 2005, 12860 posts, RR: 100
Reply 6, posted (3 years 7 months 3 weeks 1 day 6 hours ago) and read 11302 times:
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Quoting AA737-823 (Reply 1):
A more appropriate conclusion would be that the 777's WHICH AI IS OFFERING FOR LEASE are not hot commodities.
Quoting PlaneHunter (Reply 3):
t's not surprising at all that a niche aircraft like the 77L is hard to lease out. And one has to consider that these aircraft have a full AI interior and other AI specifics.

Exactly. The leasing airlines might not like the weight of AI's fittings or the economics of the 77L for their routes.


Everyone should also consider there aircraft were bought:
1. In the height of the bubble. Thus at premium pricing.
2. Bought with a bit of a rush. That increases the premium pricing...

For many airlines

Quoting na (Reply 5):
What would make AIs 777s so different to all other 777s
Air India 77LR Seat Map (by Karan69 Jun 8 2007 in Civil Aviation)

The business class layout has not received high marks. So any airline taking the type would have to buy new seats if they wanted to use these 77Ls ULH. Why did AI put in a regional business class layout for ULH? Having the wrong seats for ULH has a heavy plane competing against the A333. No wonder the resale value is poor.

Lightsaber



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User currently offlinesrbmod From , joined Dec 1969, posts, RR:
Reply 7, posted (3 years 7 months 3 weeks 1 day 6 hours ago) and read 11282 times:

Quoting na (Thread starter):
Seems 777s arent that much in hot hot demand anymore.

Considering the current economic climate worldwide, there are other planes in less demand the 777 and in some cases, rather new airframes are being scrapped because they're worth more in pieces. One thing to consider is that the 777s in question are the 200LRs, which is more of a niche a/c that doesn't fit in with the most 777-200 operators, as they do not need the range that it has or they currently operate the A340-500 in that role.

Quoting PlaneHunter (Reply 3):

Exactly. It's not surprising at all that a niche aircraft like the 77L is hard to lease out. And one has to consider that these aircraft have a full AI interior and other AI specifics.

I remember the rumor for awhile was that Delta was going to lease them and I guess that was all it was a rumor. I guess they'll have to hold onto them until the 787s arrive and at that point, I'm sure someone will be interested in them if the price is right (With DL deferring 787 deliveries until 2020, perhaps they'll be interested in any 772LRs that hit the market.).


User currently offlineojas From India, joined Mar 2008, 2955 posts, RR: 24
Reply 8, posted (3 years 7 months 3 weeks 1 day 6 hours ago) and read 11240 times:

Quoting lightsaber (Reply 6):
Why did AI put in a regional business class layout for ULH?

How is it a regional layout? If the 2-3-2 layout is the concern you might want to take a look at Emirates' B777 fleet.



A lion does not concern himself with the opinions of the sheep
User currently offlineStitch From United States of America, joined Jul 2005, 30537 posts, RR: 84
Reply 9, posted (3 years 7 months 3 weeks 1 day 5 hours ago) and read 11045 times:
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Quoting na (Thread starter):
Seems 777s arent that much in hot hot demand anymore.

The 777-300ER continues to be very much in demand and both lease rates and values continue to increase quarter to quarter.


User currently offlineRobK From United Kingdom, joined Sep 2004, 3946 posts, RR: 18
Reply 10, posted (3 years 7 months 3 weeks 1 day 5 hours ago) and read 11046 times:

Why the hell did they buy them in the first place if they haven't got substainable routes for them? Crackers..   

User currently offlinePlaneHunter From Germany, joined Mar 2006, 6714 posts, RR: 78
Reply 11, posted (3 years 7 months 3 weeks 1 day 5 hours ago) and read 10936 times:

Quoting na (Reply 5):
What would make AIs 777s so different to all other 777s that you dispute my conclusion? Could you please elaborate?

Interior and other specifics most likely play a big role. Refurbishing these aircraft could be very expensive.

Quoting na (Reply 5):
AIs 777s are brandnew, and no one seems to want them at reasonable lease rates, that the bare truth.

Where does it say that the rates were "reasonable"?

And they are not just "brand new 777s", but 77Ls in particular with AI interiors and other AI specifics.

Quoting na (Reply 5):
As per the article only dumping prices were offered.

Quote?

Quoting lightsaber (Reply 6):
Everyone should also consider there aircraft were bought:
1. In the height of the bubble. Thus at premium pricing.
2. Bought with a bit of a rush. That increases the premium pricing...

  

Quoting lightsaber (Reply 6):
The business class layout has not received high marks. So any airline taking the type would have to buy new seats if they wanted to use these 77Ls ULH. Having the wrong seats for ULH has a heavy plane competing against the A333. No wonder the resale value is poor.

  

Quoting Stitch (Reply 9):
The 777-300ER continues to be very much in demand and both lease rates and values continue to increase quarter to quarter.

Well, the 77W is a class of its own.   


PH



Nothing's worse than flying the same reg twice!
User currently offlineGarpd From UK - Scotland, joined Aug 2005, 2612 posts, RR: 4
Reply 12, posted (3 years 7 months 3 weeks 1 day 5 hours ago) and read 10937 times:

Quoting na (Reply 5):
Thats hairsplitting. What would make AIs 777s so different to all other 777s that you dispute my conclusion?

They are 200LR models with AI specifications. This means the interior layout, the systems, avionics, fuel system and all the customisable options on the model are suit to AI's needs.
My guess is, anyone in the market for a 200LR (and lets face it, there are not many airlines who need an aicraft with such long legs), probably need them with specifications that the aircraft AI are peddling do not match or do so only partially. Modifying them for lease, then returning them to AI spec later would be prohibitively expensive. Thus, low interest for these particular aircraft.

This does not translate to a low interest for the 777 family in general as you suggest.

[Edited 2010-12-04 10:28:57]


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User currently offlinePlanesNTrains From United States of America, joined Feb 2005, 5445 posts, RR: 29
Reply 13, posted (3 years 7 months 3 weeks 1 day 4 hours ago) and read 10771 times:

Quoting na (Reply 5):
Thats hairsplitting. What would make AIs 777s so different to all other 777s that you dispute my conclusion? Could you please elaborate? AIs 777s are brandnew, and no one seems to want them at reasonable lease rates, that the bare truth. As per the article only dumping prices were offered.

One airline, three frames - is that really a fair sample of the market dynamics? It seems like you really want to make a point here, but I don't see what backs it up.

Others added plenty of reasons why this might be the case, but clearly without knowing all the details how can one conclude that the 777 isn't in hot demand anymore?

-Dave



Totes my goats!
User currently offlineLAXintl From United States of America, joined May 2000, 24796 posts, RR: 46
Reply 14, posted (3 years 7 months 3 weeks 1 day 4 hours ago) and read 10579 times:

Air India has some confused business practices.

I know an airline that had discussed the leasing from AI, however could not come up with a deal.

This situation Its akin to owning a home and renting out. In today's market you can't get enough rent to cover your mortgage, so instead of getting some money for your home you are allowing it to go empty instead while you still have to pay your full mortgage every month.

Today some of the planes in questioned are grounded essentially or only being used token amount which is not a healthy situation, and earning zero towards their capital cost.

[Edited 2010-12-04 11:37:05]


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User currently offlinelaca773 From United States of America, joined Nov 2004, 4002 posts, RR: 2
Reply 15, posted (3 years 7 months 3 weeks 1 day 4 hours ago) and read 10258 times:
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Quoting RobK (Reply 10):
Why the hell did they buy them in the first place if they haven't got substainable routes for them? Crackers..
Quoting LAXintl (Reply 14):
Air India has some confused business practices.

I know an airline that had discussed the leasing from AI, however could not come up with a deal.

This situation Its akin to owning a home and renting out. In today's market you can get enough rent to cover your mortgage, so instead of getting some money for your home you are allowing it to go empty instead while you still have to pay your full mortgage every month.

Today some of the planes in questioned are grounded essentially or only being used token amount which is not a healthy situation, and earning zero towards their capital cost.

It really sounds like AI can't figure out what their business plans are still after taking delivery of these very specialized birds. I think most of us thought they would have opened SFO and re-started LAX with nonstop service using the 77Ls.


User currently offlinebeeweel15 From United States of America, joined Nov 2003, 1739 posts, RR: 0
Reply 16, posted (3 years 7 months 3 weeks 1 day 3 hours ago) and read 9948 times:

I don't think we are talking 77L aircraft. According to the lists of 777 aircraft available for lease or sale right now the 777's from Air India are older model 777-200ER models which are ex UAL aircraft from the early batch of 777's built. AI bought those planes when the prices were at their premium and now that prices for purchasing and leasing especially in the used market have come down they are having a hard time getting them off their hands because they are charging a premium price which no one wants to or can afford to pay.

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[Edited 2010-12-04 12:05:56]

The current lease rates are from $900K for newer aircraft to around $500K for older aircraft and I am certain they are trying to get closer to the $900K rate while most folks want or can pay closer to or below the $500K range


[Edited 2010-12-04 12:10:48]

User currently onlinesunrisevalley From Canada, joined Jul 2004, 4853 posts, RR: 5
Reply 17, posted (3 years 7 months 3 weeks 1 day 3 hours ago) and read 9893 times:

Quoting Garpd (Reply 12):
Modifying them for lease, then returning them to AI spec later would be prohibitively expensive. Thus, low interest for these particular aircraft.

or put another way , these costs are reflected in the lease rate being offered.


User currently offlinejbmitt From United States of America, joined Jan 2002, 547 posts, RR: 2
Reply 18, posted (3 years 7 months 3 weeks 1 day 3 hours ago) and read 9831 times:

Quoting beeweel15 (Reply 16):
I don't think we are talking 77L aircraft. According to the lists of 777 aircraft available for lease or sale right now the 777's from Air India are older model 777-200ER models which are ex UAL aircraft from the early batch of 777's built. AI bought those planes when the prices were at their premium and now that prices for purchasing and leasing especially in the used market have come down they are having a hard time getting them off their hands because they are charging a premium price which no one wants to or can afford to pay.

The article linked in the first post specifically mentioned the 77L


User currently offlineAA737-823 From United States of America, joined Mar 2000, 5722 posts, RR: 11
Reply 19, posted (3 years 7 months 3 weeks 1 day 1 hour ago) and read 9001 times:

Quoting na (Reply 5):
Thats hairsplitting. What would make AIs 777s so different to all other 777s that you dispute my conclusion? Could you please elaborate? AIs 777s are brandnew, and no one seems to want them at reasonable lease rates, that the bare truth. As per the article only dumping prices were offered.

I'll go ahead and let the complete whipping you've received from others do all of my elaboration for me.
Your 'bare truth' is kind of like the bare truth that the media usually reports on plane crashes. Similarly, however, the tag line, "Hundreds screaming as jetliner nosedives" rarely tells the WHOLE story.


User currently offlineJAAlbert From United States of America, joined Jan 2006, 1548 posts, RR: 1
Reply 20, posted (3 years 7 months 3 weeks 1 day ago) and read 8360 times:

Quoting Garpd (Reply 12):
Thus, low interest for these particular aircraft.

Actually there was interest from three different airlines, just not at the price AI wants.

Quoting beeweel15 (Reply 16):
I don't think we are talking 77L aircraft
Quoting jbmitt (Reply 18):
The article linked in the first post specifically mentioned the 77L

You're both right. Quoting from the article:
"ATI reported in May that Air India was negotiating deals to sublease six 777-300ER/200LRs"

Quoting LAXintl (Reply 14):
Air India has some confused business practices.

This is an interesting comment. Again, the article states:
" . . . the Indian government was not willing to accept shrinking Air India's network, especially under a scenario in which the carrier would have to incur a loss in order to lease out aircraft."

What is left unanswered by the article (or AI) is whether AI will make more money (or lose less money) flying the retained 777s on AI's routes or by suspending the routes and leasing out the aircraft. I would imagine an airline would perform a cost/benefit analysis for all options before making such a decision, but perhaps that is not the case!


User currently offlineGarpd From UK - Scotland, joined Aug 2005, 2612 posts, RR: 4
Reply 21, posted (3 years 7 months 3 weeks 23 hours ago) and read 8093 times:

Quoting beeweel15 (Reply 16):
I don't think we are talking 77L aircraft

The article quite clearly mentions the 777-200LR.
There is no reference to 777-200ER aircraft.

Quote:
Air India currently operates a fleet of eight 777-200LR and 12 777-300ERs, according to Flightglobal's ACAS database. Palit says six of these 777-200LRs are now being used "sub-economically" on medium-haul routes to Europe and North Asia



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User currently offlinegr8circle From Canada, joined Dec 2005, 3092 posts, RR: 4
Reply 22, posted (3 years 7 months 3 weeks 21 hours ago) and read 7391 times:

Quoting Garpd (Reply 21):
The article quite clearly mentions the 777-200LR.
There is no reference to 777-200ER aircraft.

How can AI be leasing out the 200ERs? Weren't they returned to the lessor quite some time back...? It's the 300ERs and 200LRs that they have now as owned planes.....


User currently offlineETinCaribe From Ethiopia, joined Dec 2009, 722 posts, RR: 0
Reply 23, posted (3 years 7 months 3 weeks 20 hours ago) and read 7089 times:

Things that AI is finding hard to swallow:
1) this is a buyers' market, not a sellers' esp for the 772LR
2) whichever way they want to slice it, at the end of the day, AI loses $$$ - either by leasing at lower rates than what the airline pays for the planes or by using them sub optimally within their current fleet


User currently offlinedavs5032 From United States of America, joined Sep 2010, 388 posts, RR: 0
Reply 24, posted (3 years 7 months 3 weeks 20 hours ago) and read 7067 times:

Quoting na (Reply 5):
What would make AIs 777s so different to all other 777s that you dispute my conclusion?

This is comparable to saying that the 738 is no different than the 736, so it must be crap...although I wouldn't put it past you.


25 Post contains links and images lightsaber : And there is a pecking order in the 777s: 77W is by far in the most demand 77E is next 773 has low resale demand 77A has the lowest resale demand (as
26 Post contains links eta unknown : The 777's are the LR's. Four A310 freighters are also trying to find temporary homes: http://www.thehindubusinessline.com/...10/14/stories/20091014502
27 Navigator : I think the 777 is in very hot demand but maybe the terms Air India is offering are not attractive enough
28 dennys : If so which type of aircraft Will replace them on thé AI 's network?
29 Garpd : If you read my posts, you'll see I've been talking about the LRs!
30 ojas : B787 and if not the B787 the A330 aircraft. 4 out of 8 B777-200LRs deployed on routes like LHR, FRA, PVG while the other 4 are doing YYZ and EWR whic
31 kiwimex : Not doubt with loans ultimately guaranteed by the USG (lucky Boeing!) so the US taxpayer will probably end up wearing this one.
32 Post contains images Caryjack : It's specialized for sure but not "really really" specialized. Boeing does make freighters out of them after all. I like the 77L for emerging long ha
33 Thorben : I wonder how many here actually read the article this far before posting. As far as I understand it, the leasing deal was mainly, if not only, about
34 Delimit : Why? It's not like AI is defaulting on payments.
35 gr8circle : Yeah...I noticed that......my post was actually in response to beeweel15 who stated that the aircrafts up for offer by AI were the older 772s leased
36 Stitch : I can't find the reference, but as I recall the 77L was holding her own in terms of value and lease rates, though not as strongly as the 77W and 77F.
37 kiwimex : Not yet, no. That's why I said "will probably end up wearing this one" rather than "is wearing this one".
38 akelley728 : It's funny you mention that, I personally am going through the same thing. We had to move, and couldn't sell our old place. We got a renter, but it's
39 lightsaber : Fair enough... hence why I qualified that I'm not sure where the 77L/773 went in that order. What matters is the 'top two' have great resale, the oth
40 ETinCaribe : A couple of things: 1) corporations are not like people, they use different set of financial decision making 2) the fleet is in use, meaning that it
41 N471wn : But out of 903 built to date only 4 frames are in storage----that says it all about how popular this a/c is
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